Boeing Is Expected To Roll Out A New 737 Model On Monday

This is source I found from another site, main source you can find in last paragraph

Unlike the subsidy slugfest with Airbus that has dragged on for 14 years with no discernible impact so far, Boeing is looking for a quick and decisive knockdown as its increasingly heated dispute with Canadian plane maker Bombardier reaches a crucial decision point on Monday.

Just five months after Boeing began the case, a U.S. Department of Commerce preliminary ruling is expected to impose punitive tariffs on imports of the new CSeries commercial airliners built by Montreal-based Bombardier.

That could immediately add millions of dollars to the price tag for each CSeries jet for the U.S. market, the first of which is due to be delivered to Delta Air Lines in April.

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The rising temperature of the debate reflects its high stakes for both sides.

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Before the ruling, Canadian Prime Minister Justin Trudeau warned Monday that his nation’s $5.2 billion deal to buy 18 Boeing F/A-18 Super Hornet jet fighters and related hardware is on hold, because “we won’t do business with a company that’s busy trying to sue us and put our aerospace workers out of business.”

British Prime Minister Theresa May also weighed in, last month calling President Donald Trump to express her concern at the potential threat to jobs in Belfast, Northern Ireland, where the wings of the CSeries jets are built.

Boeing says it is fighting to prevent another government-subsidized rival like its European nemesis Airbus from entrenching itself.

Called as a witness in the case in May, Boeing Vice Chairman Ray Conner testified that “it will only take one or two lost sales involving major U.S. customers before the commercial viability of the MAX 7 — and therefore the U.S. industry’s very future — becomes highly doubtful.”

Bombardier this week accused Boeing of “pure hypocrisy” for complaining about Canadian subsidies while it receives billions of dollars in tax breaks.

Boeing hasn’t flinched, and dismisses the international political pressure.

“Boeing is not suing Canada,” the company said in a response to Trudeau. “This is a commercial dispute with Bombardier.”

With Trump having raised the banner of America First and criticized the NAFTA trade agreement with Canada, Boeing must hope for White House support.

Battles to win United and Delta

The CSeries, launched in 2008, is a new small single-aisle jet family with a five-abreast passenger cabin that’s offered in two models: the CS100, seating 100 to 135 passengers, and the larger CS300, seating up to 160 passengers.

Widely acknowledged as an extremely efficient plane, it has carbon-fiber composite wings, a metal fuselage, new Pratt & Whitney geared turbofan engines, and a clean-sheet design optimized for the smaller end of the commercial-airliner market.

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The overlap with Boeing’s market is between the CS300 and Boeing’s smallest 737 six-abreast single-aisle jet. That’s the current model 737-700 or the new version, the 737 MAX 7, which seats up to 172 passengers.

Boeing’s concern about the CSeries crystallized in 2015 in a sales campaign at United. Boeing won that battle with a sale of 40 of its 737-700 jets that locked up what would have been the first big blue-ribbon customer for the CSeries.

In an internal company video in early 2016, Conner, then the head of Boeing Commercial Airplanes, made clear that blocking Bombardier from winning market traction had been a high priority.

He recalled how in the mid-1990s Boeing lost a similar sales campaign at United to Airbus, giving a validating boost to A320 sales in the U.S. and leading to the European jet maker’s rise to parity with Boeing.

Determined not to repeat that experience with the CSeries, Boeing slashedits price and gave United a great deal to beat out Bombardier.

“Ultimately we won, but I’m going to tell you, we got pushed to the wall,” Conner told the employees.

In its initial petition to the U.S. International Trade Commission (ITC) in April, Boeing made the parallel explicit.

“Just as Airbus years ago stole domestic market share and helped drive U.S. competitors Lockheed and McDonnell Douglas out of the commercial-airplane market by selling its subsidized aircraft at below-market prices, Bombardier has targeted Boeing,” the company stated in its petition.

Bombardier, though stymied at United, in April 2016 finally made the breakthrough it had been seeking with a big sale of 75 CSeries jets to Delta.

This time, Boeing didn’t propose its 737 because Delta was specifically looking for a smaller jet, instead offering Delta some used Embraer E190 regional jets that it had bought in a trade.

Delta bought those from Boeing, then decided it needed more jets and did the deal for the CSeries — a sale that’s now the centerpiece of the case against Bombardier.

Conner testified before the ITC in May that the Delta sale was a “market-defining event.”

Even though Delta was explicitly shopping for a smaller plane than Boeing makes, Conner argued that the CS100 was Bombardier’s wedge into the small single-aisle market and that Delta might later exercise an option to take CS300s instead of the smaller jets.

Conner in his testimony focused on the precarious position of the 737-700 and its forthcoming replacement, the 737 MAX 7.

The current 737-700, once the mainstay of the huge Southwest Airlines fleet, has gone out of fashion as the major airlines have shifted toward flying larger planes like the 737-800.

And though the 737 MAX family has sold very well overall, the smallest MAX 7 model has not. Conner pointed out that Boeing has only 63 orders for it and none from U.S. carriers in the past six years.

“The 100- to 150-seat market matters greatly to Boeing, and Bombardier is very close to forcing us out of it altogether,” he told the ITC.

Reaction to claim

The airline world has reacted with some incredulity to Boeing’s claim that the future of the U.S. aerospace industry is at stake and that the MAX family’s backlog of just over 3,800 firm orders is threatened by the CSeries, which has less than one tenth that many orders.

Aviation analyst Scott Hamilton of Leeham.net dismissed Conner’s analysis that Bombardier threatens the MAX 7, instead saying simply, “Nobody wants it.”

He said that jet has had poor sales not because of the CSeries but because it’s a relatively heavy and therefore an inefficient shrink of the larger Max 8 model, that makes sense only on routes into airports with shorter runways or at hot and high elevations.

“The MAX 7 has been reduced to a niche airplane,” Hamilton said. “It will never be a big seller.”

Testifying before the ITC in May on Bombardier’s behalf, Greg May, Delta’s senior vice president of Fleet and Supply Chain Management, offered a similar analysis.

The 737-700 “is not economical on the vast majority of our routes,” May said. “That is why we only have 10 of these aircraft in our fleet.”

In any case, May emphasized, Boeing never offered the 737-700 to Delta.

“It would be wrong to suggest that Boeing lost sales to Delta because we purchased the CS100,” May insisted. “Boeing simply was not in the mix. They did not have a plane that satisfied our mission profile and needs.”

Expected backing

And yet, Boeing’s arguments persuaded the ITC to move forward with the case. And Commerce is expected to back Boeing on Monday with a ruling that Bombardier has worked its way into the U.S. market, thanks to government subsidies.

Since the entire CSeries project was on the rocks for years due to lack of sales, it has needed substantial subsidies to stay alive.

To develop the CSeries, Bombardier originally won a total of about $670 million in launch-aid loans from Canada, the U.K. and the province of Quebec.

And when Bombardier threatened to implode in 2015, the government of Quebec stepped in with a bailout, investing $1 billion for a 49.5 percent equity share of the CSeries program. Bombardier got a further $1.5 billion equity investment from a Quebec pension fund.

New management came in with a mandate to reignite CSeries sales. And Canada’s government added another $381 million for Bombardier the following year.

As Boeing itself has argued at the World Trade Organization, subsidies per se are not illegal.

Under internationally agreed rules, a government is permitted to lend money for development or to make an equity investment in a company. But to avoid allegations of uncompetitive practices, funds must be awarded on commercially reasonable terms.

Loans must be repaid with interest. Equity interests must be acquired at a price that makes some kind of commercial sense.

Naturally, Bombardier contends its subsidies meet international standards. Boeing insists not.

Adjudicating such highly complex matters is usually the domain of the WTO — and takes a very long time.

On this occasion, as Bombardier makes its move into the U.S. market, Boeing has seized the opportunity to stake out its position in a local forum instead of the WTO.

It’s a lot easier to call upon the U.S. government to police trade into the U.S. than it is to get the WTO to rule on a global trade issue.

After its determination Monday about the subsidies, Commerce is due to issue a second ruling next monthas to whether Bombardier’s pricing in the Delta campaign amounted to “dumping” of goods well below cost.

Then a final determination in the case, deciding the extent of the “injury” to Boeing, will come by February.

If Bombardier loses, every CSeries jet that is imported to the U.S. faces a tariff, an extra duty that must be paid to the U.S. Treasury on top of the selling price.

Boeing has asked for a crippling duty of 80 percent added to the sales price, estimated at $25 to $30 million. .

The political implications of the case go beyond a U.S. vs. Canada standoff.

Bombardier, which also makes business jets and trains, has many U.S. suppliers and spends about $3 billion annually here.

“The CSeries is a large U.S. aerospace success story,” said Mike Nadolski, Bombardier’s vice president of communications.

The company estimates that half the content of the CSeries comes from U.S. aerospace suppliers. All the expensive equipment used to make the composite wings of the jet in the Belfast factory was designed, built and installed by Mukilteo engineering firm Electroimpact.

Nadolski said the CSeries, if successful, will be worth $30 billion to the U.S. over the life of the program and support nearly 23,000 direct and indirect U.S. jobs.

A few smaller U.S. airlines have joined Delta in objecting to Boeing’s petition, and U.S. senators from Kansas and West Virginia, where Bombardier has facilities, lobbied the ITC for the Canadian company.

Boeing, meanwhile, still faces final resolution of the WTO case in which it is accused of taking illegal subsidies through the Washington state tax breaks for the 787 Dreamliner.

Its lawyers nevertheless remain hopeful of emerging from that case unscathed, and are equally optimistic that they will succeed in nailing Airbus in the parallel case against that great rival.

Meanwhile, to stave off this new fledgling competitor, Boeing is adopting a tough line against Bombardier, which Conner expressed in his ITC testimony without a trace of irony:

“It is untenable for us to go on competing against government-subsidized competitors,” Conner said.

This is source I found from another site, main source you can find in last paragraph

Source : http://www.seattletimes.com/business/boeing-aerospace/boeing-expects-a-quick-fix-on-dispute-with-bombardier/

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